The Bullwhip Effect in Closed-Loop Supply Chains: A Comparison of Series and Divergent Networks

Abstract

Supply chain network structure has been mentioned as one of the contributors to the Bullwhip Effect in the supply chain. With the incorporation of reverse logistics into most of the supply chains, the structure of the supply chain changes especially if there are more than one player in the reverse chain. In this research, systems dynamics models were developed to compare the Bullwhip Effect between serial and divergent supply chain networks with different structures in closed-loop supply chains. The scenario experimentation revealed that increasing the number of collectors in the reverse chain increased the Bullwhip suffered, Bullwhip generated and the Bullwhip slope in all supply chain configurations. Therefore, it seems to be more beneficial for a closed-loop supply chain to have one reliable collector supplying used products than more than one collector with uncertainties in the quantity of products returned. Findings also reveal that a serial network is more sensitive to changes in the reverse chain in terms of the number of parties involved compared to a divergent supply chain. This means that the serial network assumption overestimates Bullwhip measures. Whilst it may be easy to measure the Bullwhip Effect by assuming a serial supply chain structure, this value might be overestimated especially for supply chains that are involved with more than one player at each echelon. These findings provided some useful insights on modelling supply chain networks to reduce the Bullwhip Effect in closed-loop supply chains.